PEST Analysis On The RMG Sectors

In Bangladesh

Submitted By:

Submitted To:

Mohammad Moniruzzaman.

Md. Fazley Elahi Chowdhury(PhD).

Student ID: 13164046

Course Instructor,

BRAC University.

BRAC Business School,

BRAC University.

PEST Analysis On The RMG Sectors In Bangladesh

RMG INDUSTRIES IN BANGLADESH:
The Ready-Made Garments (RMG) industry is undoubtedly the largest exporting industry in
Bangladesh. For the last 20 years this industry attained high profile foreign exchange earnings,
exports, industrialization and contribution to GDP within a short span of time. Two million workers
directly involve with this industry along with almost ten million involves indirectly and seventy
percent of them are women. RMGs contribution in terms of GDP is highly remarkable; it has reached
13 percent of GDP.

WHAT IS PEST:
Pest is a simple framework for environmental analysis that distinguishes four major categories of
areas:

Political
Economic
Social
Technological

POLITICAL ENVIRONMENT IN THE RMG SECTOR

Despite being a democratic country, the safeguards of democracy are not being exercised properly
which have negative impact on business operation. Political activities like hartal hinders the national
and international trading. Political state bureaucracy is another problem. Corruption in banking like
the hallmark scandal, fire in Tazrin Fashions, thousands of people died in Rana Plaza collapse all
these types of incidents create a negative impression in the international market specially the U.S and
European market who are the biggest buyer of our RMG products. As a result, The US order suspends
Bangladesh's duty-free trade privileges under the terms of a trade program called the Generalized
System of Preferences (GSP), designed to promote economic growth in developing countries.
At a statement of Bangladesh foreign ministry, it says, "It cannot be more shocking for the factory
workers of Bangladesh that the decision to suspend GSP comes at a time when the government of
Bangladesh has taken concrete and visible measures to improve factory safety and protect workers'
rights." But in another statement U.S President Barack Obama, in a proclamation, said Bangladesh
was not taking steps to afford internationally recognized rights to its workers.

ECONOMIC ENVIRONMENT
Any assessment of the economy depends in a standardized format. From the recent economic trends,
the growing economy is satisfactory. In 2007-08 when U.S faced difficulties in their economy and
afterwards in 2010-11 many European countries, in that scenario Bangladesh went through a steady
progress. According to BBS( Bangladesh Bureau of Statistics) In the year 2010-11 economic growth
rate was 6.7 , in 2011-12 was 6.3 and in 2012-13 it will be 6.03.

Recent accidents like fire in Tazrin Fashions,Rana Plaza collapse creates anger and frustration to the
garment workers. India takes these chances to grab our market. They are planning to take long term
initiatives knowing the fact that China, Bangladeshs biggest competitor is stepping back in this RMG
business. According to Indias apparel export promotion council, Indian government is planning to
make 12 apparel park in India. Of them 4 is almost completed. They are situated in Karnataka, Kerala,
Tamilnaru, and Uttar Pradesh. Indias RMG industry is creating a 5 year plan which they are planning
to earn over 6 billion USD within the year 2017.
Rahul Mehta, Chairman of CMAI (Clothing Manufacturers Association of India) said that China
exports ten times than India. If 10% of that export comes to India, then Indian RMG export will be
doubled. In 2012-13 foreign investment in Indian textile industry comes worth over 10 million USD.
Till June 2012-13 it is over 3 million USD. So, in near future, it is clearly visible that India will be a
tough competitor of Bangladesh in RMG sector.

SOCIAL ENVIRONMENT
Bangladesh have some internal problems like flabby communication problem, transportation problem,
shortage of natural gas, load shedding etc. Countries like Bangladesh, investment is more required
than money savings. Foreign investment reduces the comparison between investment and savings.
Moreover, we have shortage of money for import supply. Foreign investment reduces that differences
too.

TECHNOLOGICAL ENVIRONMENT
Technology is a key determinant of competitiveness. Not only quality product is sufficient, it needs
quality packing as well. Computerized packing system ensures the longevity of the product. Improved
machineries enables large number of productions. Technology is at the heart of price competitiveness
gained through productivity improvement. Technological change especially in the fields of transport
and communication is at the heart of the process of globalization affecting all aspects of modern life.

Reference:
1. by Badrul Alam published in Bonik Barta.
2. An exclusive interview of AB Mirza Azizul Islam, Former finance adviser to
the last caretaker government by S.M Musa published in Bonik Barta.
3. Introduction: Business and its environment by Paul Wetherly and Dorron Otter.